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In paying $1.65 billion for video-sharing site YouTube.com, Google Inc. is betting large that mixing Internet search and online video will reap oodles of new revenue.
When Larry and Sergey met Steve and Chad, the four focused on combining two powers of the Internet-web search and online video-to create a powerful new traffic-generating platform for building advertising and other forms of online revenue. And in agreeing to pay $1.65 billion in Google Inc. stock for all of YouTube Inc., Google co-founders Larry Page and Sergey Brin are betting large that mixing Internet search and online video will reap oodles of new revenue.
“In acquiring YouTube, Google has, in one fell swoop, increased their number of video streams-and potential ad revenue from streaming-tenfold,” says Gian Fulgoni, chairman of researchers comScore Networks Inc.
YouTube ranked third in the number of Internet video streams in July, with 649 million for a market share of 9%, while Google ranked eighth with 60 million and a share of 1%, comScore says.
To YouTube co-founders Chad Hurley, the upstart company’s CEO, and Steve Chen, CTO, the tie with Google’s search expertise will make it easier for consumers to find video content. By making it simple for consumers to upload and share (via e-mail) video on the Internet, YouTube, launched just last year, now delivers more than 100 million video views daily, as 65,000 new videos are uploaded to its site every day.
That much content makes YouTube a powerful potential force in generating Internet traffic-about 20 million unique visitors a day, according to Tower Group-that can be monetized through online advertising sales as well as in links to online sales of premium content video and other products. YouTube’s advertisers include GreatFood4Free.com, a rewards program that runs banner ads offering online coupons to restaurants.
The acquisition follows sharp increases over the last several months in U.S. Internet traffic garnered by YouTube, while Google’s share of overall Internet traffic has remained relatively flat, according to researchers Hitwise. In September, YouTube’s share of U.S. Internet traffic reached 0.27%, more than 4 times the 0.063% share of Google Video, Hitwise says.
In late June, traffic from all of Google’s sites began sending more traffic to YouTube than to Google Video, Hitwise says. After Google moved its Google Video link to its home page in August, traffic to Google Video jumped from a market share of about 0.025% to 0.063%, while YouTube’s share rose from about 0.21% to 0.27%.
“The YouTube team has built an exciting and powerful media platform that complements Google’s mission to organize the world’s information and make it universally accessible and useful,” Google CEO Eric Schmidt says. “Together, we are natural partners to offer a compelling media entertainment service to users, content owners and advertisers.”
Adds Hurley, who with Chen announced the acquisition in a video punctuated with laughter and posted on YouTube.com: “By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users and to create new opportunities for our partners. I’m confident that with this partnership we’ll have the flexibility and resources needed to pursue our goal of building the next-generation platform for serving media worldwide.”